U.S. Cattle Herd Shrinks to Smallest in 53 Years

Jan. 28 (Bloomberg) -- The U.S. cattle herd shrank to the
smallest size in 53 years as of Jan. 1, as feed costs climbed
and beef producers slaughtered more animals to take advantage
of higher prices.

The herd, including beef and dairy animals, totaled 92.582
million head as the year began, down 1.4 percent from a year
earlier, the U.S. Department of Agriculture said today in a
semiannual report. That’s the smallest since 1958, the USDA
said. Seven analysts in a Bloomberg News survey were expecting
a 1.6 percent reduction, on average.

“We slaughtered a lot of cows and heifers in 2010, even
though the outlook was quite good for saving them and breeding
them,” Ron Plain, a livestock economist at the University of
Missouri in Columbia, said before the report. “A lot of the
cow/calf producers just needed cash now.”

Ranchers in the southern Great Plains made an estimated
$52 per cow sold last year, following losses of about $32 in
2009, said Jim Robb, the director of the Livestock Marketing
Information Center, a researcher funded by the industry and
government. Producers aren’t ready to expand because most of
the profit wasn’t made until the fourth quarter, he said.

Rising Futures

Cattle futures climbed 26 percent in the past year,
reaching a record $1.166 a pound on Jan. 18. Still, surging
prices for corn, the main ingredient in livestock feed,
discouraged expansion. The grain has jumped 78 percent in the
past year.

“One of our biggest concerns as we look ahead are these
increasing costs and how that potentially influences the size
of the U.S. livestock industry,” Robb said before the report.
“The largest cost input across the livestock industry is the
feedstuffs.”

The number of young, female beef cattle held for breeding
fell to 5.158 million, down 5.4 percent from 5.451 million a
year earlier, the USDA said. Analysts expected a 2.1 percent
drop.

Steers for immediate delivery averaged $1.0431 a pound in
the first four days of this week, up 25 percent from the same
period a year ago, according to USDA data. Before today,
wholesale beef prices rose 23 percent in the past 12 months.

‘Little Incentive’

“There’s just very little incentive to hold back heifers
and begin to build herds,” John Nalivka, the president of
meat-consultant Sterling Marketing Inc. in Vale, Oregon, said
before the report. “Prices are high, and that caused a lot of
beef cows to go to slaughter.”

The inventory of heifers for milk-cow replacement totaled
4.557 million on Jan. 1, up 0.7 percent from 4.526 million a
year earlier, the USDA said. The average analyst estimate was
for a 0.6 percent decline.

The number of calves born during 2010 was estimated at
35.685 million, down 0.7 percent from a year earlier and the
fewest since 1950, according to the USDA.

Cattle futures for April delivery rose 0.6 cent, or 0.5
percent, to settle at $1.12775 on the Chicago Mercantile
Exchange. Feeder-cattle futures for March settlement gained
0.625 cent, or 0.5 percent, to $1.26225.